Advice Needed on General Contractor & Re-Modeling

Folks, I am asking for your experience (do's & don'ts) on doing a contract w/ a GC and dealing with the GC during the construction period. This is a first for us.
We decided to do an addition of approx. 200 sqft - - basically another BR that is well integrated w/ the existing plan (Loni says she would also do it if she had our house!). Needless to say, we had sticker shock on pricing (it's costing per SF almost as much as if we were also buying land w/ the addition). We decided on outsourcing it to a GC as neither of us is really experienced in selecting or even getting subs to return phone calls.
(1) We tried to knock the price down by doing painting ourselves, and tiling the floor (except for a compact 1/2 bath that will be a wet room). The resulting price was still shocking and limited to standard hardware and $4/sf for bath tile.
(2) How firm is a GC's price -- everything I read is to plan for 10-15% overrun (we have exceeded our initial budget by about 20% already).
(3) Any ideas for doing a contract? How should payment be made??
(4) How are construction details handled as they come up where there may be 2 ways of doing it, both are acceptable but one is more complex than the other?
(5) The GC is recommended by the Architect; we're comfortable with him, but should we being doing more due diligence?
(6) Because of this, the sprinkler system and lawn areas will be damaged or destroyed. Do constractors have any responsiblity for protecting or fixing infrastructure?
(7) Any ideas for keeping Tax Assessment down because of this improvement??

Here's my four cents: (1) Make sure the GC is licensed, bonded and in good standing in CA. Ask about worker's comp policy/coverage; (2) Get recent references (ideally the last two projects) and call them. Take the time up front to do this and ask about any over-runs, the working relationship; (3) Ask the GC about his/her liability insurance and once retained, get listed on his/her policy for the duration of your project. Your copy of this rider will probably alleviate some of your coverage concerns; (4) Get a written contract that states that any changes or additions must be memorialized in Change Orders signed by you, the Owners, and the GC. The initial Contract should specify the total project cost, and the dates/amounts for the deposit and any progress payments. Change Orders should describe any addition/modification and its associated cost. If there are numerous changes, then the Change Order should list the cost for each line item. No surprises for either party. But remember, cost over-runs often happen when Owners change their minds about what they want done. It's not always the Contractor that makes the costs run up. Indecision and/or additions cost time and money.

I have a friend in Palo Alto that had lots of work done (kitchen remodel plus a small addition) and she wrote into her contract that she would pay a bonus of $ ___ if the GC would finish by such and such date. This really motivated her busy Contractor. You may not be in the same time crunch situation but I thought it was a creative approach.

My husband has his own landscape company and he often follows the steps listed above. The landscaper is usually the last person on a job site for the very reason you mention, trampling. You can always write something into the Contract regarding renumeration in the event of damage. Open communication is key and the Contract/Change Order system, with minimal changes, usually adds up to a smooth and efficient project. Good luck!